Home » Palm Oil: Addressing Deforestation and Human Rights Risks in the Supply Chain

Palm Oil: Addressing Deforestation and Human Rights Risks in the Supply Chain

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This whitepaper explores the environmental and social impacts of palm oil production, with a focus on the role of ESG ratings in driving sustainable transformation. It highlights the limitations of current certification schemes, outlines the financial and reputational risks for investors, and emphasizes the need for collective action from companies, investors, and rating agencies.

Key Takeaways

  • Environmental Impact: Palm oil production contributes to deforestation, biodiversity loss, greenhouse gas emissions, and land degradation.
  • Social Challenges: It is linked to land grabbing, displacement of Indigenous communities, and labor rights abuses—especially in Southeast Asia.
  • Corporate & Financial Responsibility: Companies and financial institutions must integrate sustainability into procurement and investment strategies. Current certification schemes like RSPO offer limited assurance due to weak enforcement mechanisms.
  • Investor Risk & Opportunity: Unsustainable practices pose reputational and regulatory risks. Aligning with sustainable palm oil practices can boost operational resilience and long-term returns.
  • ESG Ratings as a Tool: ESG ratings, particularly those that include controversy data like Inrate’s, offer deeper insight beyond self-reported metrics and help identify high-risk actors in the palm oil industry.

Contributor

Nina Watter Gómez

ESG-Analyst

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